Audit Findings and Recent Cases Presented By: Kate Becker Audrain County Collector of Revenue
NO JUDGING!!!! All of us have had an Audit finding that was taken out of context or the source was completely out of our control. The point of this presentation is not to point fingers or judge but rather learn from the audit experiences of others.
Not all audit findings make sense…
Receipt slips did not match the date the payment was received… Collector received December postmarked mail in January and the receipt showed the post marked date. Collector closes out their day at 3pm to balance and complete their deposit. Any payments received after 3pm will show a date of the next business day.
Checks were not deposited intact or timely… January postmark but base tax payment. Auditor wanted them to deposit the money and send a bill for the rest. Collector would contact the tax payer and would hold check waiting for the difference to be sent in. Auditor also wrote them up because the taxpayer requested that the check be mailed back or shredded. They felt that we should deposit all the money first and then decide what it was for later.
Collector is responsible for receiving monies and also has abilities to post reversals… Why yes we do! Who else is going to do it? Just document, document, document!
Recent Cases
Collector resigns office due to nepotism violation
What happened… Collector annually went out for bid for the collated stuffing of their tax bills. The winning bid, since 2015, employed the Collector’s Sister. Rather than paying the company/service, the Collector paid the employees directly out of their Tax Maintenance Fund. A local attorney complained and brought to the Collector’s attention that it was an ethics violation. Collector contacted the County Attorney and the Missouri Ethics Commission for opinion.
What is nepotism? Nepotism is when any public officer or employee in Missouri, who by virtue of his office or employment, names or appoints to public office or employment any relative within the 4th degree by consanguinity (blood) or affinity (marriage or adoption). (Article VII, Section 6 of the Missouri Constitution). In addition, the political subdivision’s own policies and procedures should be consulted. What is the penalty for nepotism? The penalty for nepotism is automatic forfeiture of office. Legal action may be pursued (by the appropriate prosecuting attorney or disciplinary authority) to remove the individual from office or employment.
What has happened since… Collector voluntarily resigned office but stayed on as Collector until the Governor appointed a replacement. Replacement was the Collector’s Chief Deputy. The appointed Collector hired the resigned Collector as their Chief Deputy. The Collector, before all of this happened, had already filed to run for another term. Resigned Collector won their re-election and is again the Collector of that County.
Words for this Collector I made a mistake. I thought that going out for bid absolved me from the nepotism clause. I don’t feel that what I did had malicious intent and I owned by error and resigned.
Employee Embezzlement EMBEZZLED OVER 12-15 MONTHS
How it was done.. Employee would: Take a cash payment Enter it into the collection system Hand the receipt to the tax payer Back out the payment Pocket the cash
How is was caught… Tax Payer was told by their title company that the bill was not paid and came in to the Collector’s office to see why. They brought in receipt to show proof of payment. The Collector reached out to the Commission who reached out to the Prosecuting Attorney who reached out to the Highway Patrol. Suspected employee was out on leave and has chosen not to return. This is currently under investigation.
What has happened since… Collector called software and had them block the ability to delete payments once saved. Due to the on- going investigation the Collector’s Office was unable to accept cash payments during the 2018 Tax Season. An Audit was requested from the MO State Auditor’s Office. Collector found that the suspected employee was not bonded correctly. Per 52.300 …” Before entering upon the duties for which they are employed, deputies and assistants shall give bond and security to the satisfaction of the collector. The bond for each individual deputy or assistant shall not exceed one-half of the amount of the maximum bond required for any collector pursuant to sections 52.020 to 52.100. … The premium of the bond shall be paid by the county or city being protected. ”
Words of Advice from this Collector No matter how much you trust your employees be sure that your software company is protecting the integrity of your data. Make sure your staff is appropriately bonded and you are checking your receipt sequence numbers. Also, if you are taking prepaid payments the County needs an ordinance per RSMo 139.053.
Collector Embezzlement ESTIMATED AMOUNT TAKEN $316,758 OVER 26 MONTHS
How was it done… Collector opened an Escrow Account at the County’s Bank without knowledge of the new County Auditor. All checks made to this Collector’s office were made out to the Collector by name. Collector would deposit checks into this Escrow Account that should have been deposited into the Collector’s General Revenue account. Collector would then write a check to themselves as if transferring money from one account to another but would deposit funds into their personal account.
How it was caught… The Bank contacted the Prosecuting Attorney of that County with what they considered “suspicious banking activity.” The Prosecuting Attorney the called the Sherriff who referred the matter to the FBI. That same day the Sheriff and the Presiding Commissioner called the Collector into chambers who admitted to embezzlement and resigned office effective immediately.
What has happened since The Collector’s Office was locked and employees worked in other offices or assisted the auditors for approximately 5 weeks until a Collector was appointed. (Collector resigned March 15 th ) All the Collector’s bank accounts were frozen until the completion of the investigation. The MO State Auditor’s Office conducted a thorough investigation of the Collector’s activities and their Property Tax Collection System. On March 4 th , 2019 (the same day they would have officially been retired) the Collector was sentenced to 30 months in Federal Prison. They have lost most, if not all of their retirement, and are court ordered to pay $316,758 in restitution. The new Collector had to distribute the partially embezzled 2015- 2017 RR & Utility and any embezzled 2015-2017 tax revenue with funds paid from the Bonding Company.
A note from the new Collector… Trust no one. I was the Deputy and I followed orders. Looking back there were things that rubbed me the wrong way and I should have acted on it. If you think something is wrong it probably is. They are going live with their new software sometime in the next two months.
Audit Findings 2015-2018 AS PER HTTPS://WWW.AUDITOR.MO.GOV
Common Audit Findings: Does not have proper procedure for non sufficient funds checks. * Does not account for the numerical sequence of receipts. * Access to the property tax system is not adequately restricted. Does not store backup files at an off-site location. Does not have adequate documentation for their petty cash transactions. * Refunds of overpayments are not properly recorded. * Improperly calculated late payment penalties. Improperly calculated commissions & assessments. Does not properly document voided or deleted transactions. * Collector does not reconcile to the bank statements. * *Will be discussed in our Best Practices Panel
Does not make timely deposits: 52.360. Daily deposits and reports — interest. — ” The county collector, in all counties of the first class not having a charter form of government and in all counties of the second class, shall deposit each day in the depositaries selected by the county for the deposit of county funds, all money received by him as county collector during the day previous, and make a daily report thereof to the county auditor…”
Did not endorse checks until the preparation of the deposit… Collector uses Jaguar which endorses checks during the scanning process. Auditors wanted all checks manually endorsed immediately upon receipt.
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